Key Affording Housing Projects In Worcester Face Delays — And Stimulus Spending Deadline

WORCESTER, MA — Amid turmoil in the commercial real estate sector, several important affordable housing projects in Worcester are facing upcoming federal deadlines that, if missed, could put millions in funding at risk.

At Wednesday's Affordable Housing Trust Fund meeting, developers behind three projects received extensions to use previous grant awards as they await funding from other sources. A fourth project, the redevelopment of the Worcester Boys Club, previously received an extension for its funding due to private financing difficulties.

Worcester in 2022 created the Affordable Housing Trust Fund with $15 million from the city's ARPA federal stimulus allotment. Since then, the trustees have awarded almost all of it to a variety of projects that would create hundreds of new units of very affordable housing — badly needed in a city where rents and home prices have risen sharply since the pandemic.

The federal government has set a Dec. 31, 2024, deadline for municipalities like Worcester to obligate ARPA funds, and a Dec. 31, 2026, deadline to spend those funds. According to the U.S. Department of the Treasury, obligating funds means to commit money to a specific project.

The 2026 deadline was the bigger concern at Wednesday's meeting, with developers saying that construction timelines could place projects right at the deadline.

Civco Development's Taylor Bearden told trustees that a project redeveloping mill buildings along LaGrange Street with 40 affordable units could break ground in April, with the entire project wrapping up in December 2026, if no delays happen in the interim. Bearden said other parts of the project could be completed as soon as May 2026, allowing developers to spend the trust fund award earlier.

Affirmative Investments senior vice president Craig Nicholson gave a similar timeline for a project rebuilding about half of the Colony on Grove senior apartments. Nicholson said the company is waiting for bond financing from MassDevelopment, and is "in the pipeline" for a funding award this winter. He projected an 18-month construction process that could end sometime in the last quarter of 2026.

E3 Development's Eliza Datta told the trustees her company and co-developer Tremont Development could close on funding for phase one of the Lakeside Apartments public housing redevelopment by December. Funding for other phases could come by mid-2025, she said. The project would turn Worcester Housing Authority-owned Lakeside into a mixed-housing development with 328 affordable units (compared to 202 right now), and 10 units available to buy. The project initially anticipated more than 40 ownership units, but plans called for them to be built on a hillside that Datta said has proven too costly to develop. The developer now plans to reuse the foundations of two existing Lakeside buildings along Circuit Avenue for the 10 ownership units.

The Boys Club project, now called the Residences on Lincoln Square, still had not received financing as of this week, with developers now projecting that to come in September. The $52 million development would create 80 units of housing for people over age 62. Twenty-three units would be affordable for people earning up to 15 percent of the local area median income, and the remaining 57 would be affordable for people earning up to 60 percent of the local area median income.

Worcester Affordable Housing Trust Fund manager Jeanette Tozer told the trustees Wednesday that she is "confident" the projects will meet the required 2026 spending deadline.

It's not only affordable projects in Worcester struggling to get funding. Projects ranging from a 375-unit building next to Polar Park to a building on the former Fairway Beef property have been delayed due to capital restraints. High interest rates, a collapse in office demand and higher construction costs have all put pressure on commercial real estate in the U.S.

Since its inception, the Affordable Housing Trust Fund has awarded about $17 million to a variety of projects, including some that are well underway, like a Habitat For Humanity build along Sunderland Road. The fund has just over $900,000 left to obligate before the 2024 deadline, and will continue on with new funding possible from the state and the Community Preservation Act.

Worcester received $146 million in ARPA funding during the pandemic, and obligated the funding well before the 2024 deadline to projects ranging from park improvements to lead abatement. As of this week, over $111 million had yet to be spent.